MP VAT spares small traders

While considering pros and cons of the value-added tax system, to be implemented in MP from April 1, the state government is learnt to have decided to keep traders with a turnover of up to Rs 5 lakh out of the value-added tax (VAT) ambit.

The threshold limit for the composition scheme under VAT will be increased from Rs 40 lakh to Rs 50 lakh, as suggested by the empowered committee of the central government. However, the government is yet to decide on rates on gross turnover, while no commodity or industrial unit will be exempted from VAT Act.

Further, the state government, according to insiders and a draft on the VAT proposals, has differed from the empowered committee on VAT rates on some commodities. It's been proposed commodities like cottonseed oil cake, used as animal feed, be kept in the tax-free slab. Textiles, sugar, and tobacco, which attract additional excise, will be free from VAT in the state.

Foodgrain, lentil, atta, maida, suji and besan will also out of VAT ambit in the state. While tendu patta and raw opium will attract 25.30 per cent and 46 per cent VAT respectively. Sale of natural gas, LPG and Kerosene (except for that sold through public distribution system) will not be entitled for input tax rebate. All herbs and spices, which are kept under 4 per cent slab by the empowerment committee, will attract no tax if falls under Kirana items in the state.

As regards rates of taxes, no commodity (out of total 53 entries) of schedule one will fall under tax-free list. While four entries will attract 1 per cent tax, 111 entries will be under 4 per cent tax slab, the rest will attract 12.5 per cent tax. Eight commodities of schedule-2 part three will be out of VAT purview.

The traders will get inventory rebate on opening stock except for schedule-II part three commodities. All the traders will be offered self-assessment facility. A government insider told BS privately, Inventory rebate will be available on stocks of material of schedule-II commodities, which have been purchased after 1 April 2005 and is still lying in the stock as on 1 April 2006. Further it should be earmarked for inter-state or intra-state sale.

The rebate will also be available on a similar category stock if the trader has already paid commercial tax on purchase provided that the trader should be registered under VAT Act.

The Madhya Pradesh government is also learnt to have fixed the rate of inventory rebate at par with the commercial tax paid on the purchase of the commodity. While in case of intra-state sale the inventory rebate rate will be at par with the Central sales tax.

Inventory rebate will be available on total purchase amount if rate and amount of commercial tax is mentioned separately on bills or otherwise inventory rebate will be available on 75 per cent of the purchase amount.

Input tax rebate facility will be forwarded for two years and the traders will be allowed to adjust it in form of tax paid by him on the purchase of commodity and tax levied on its sale. In case if the tax is not adjusted, the trader will be refunded the additional amount in cash.